Cantor Sheds Light on Teva Pharmaceutical Industries Ltd (ADR) (TEVA) as Novartis (NVS) Facing the Generics Pricing Heat

Louise Chen anticipates more generic pricing pressure hit 3Q earnings for generic manufacturers.


After 42 years, biotech player Novartis (NYSE:NVS) is closing the doors to its 450-employee plant in Broomfield, Colorado within the next two years due to an intensely “saturated markets” nipping close at its heels.

Cantor analyst Louise Chen believes this was largely “driven by above average pricing pressure in the generic drug market” and weighs in with a sidelined stance on Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA).

“Hurricane season is over, but pricing headwinds persist,” the analyst writes, reiterating a Neutral rating on TEVA stock with a price target of $17, which represents a just under 14% increase from current levels. (To watch Chen’s track record, click here)

“We believe this data point suggests generic (GRx) pricing pressure continues to persist and may be a headwind to 3Q17 earnings for generic manufacturers,” continues Chen, predicting: “We think Sandoz’s withdrawal from certain saturated markets could be followed by others over time.”

Offering his take on how Novartis’ setback will impact the generics market as a whole, the analyst concludes: “The company also noted that it was discontinuing or divesting ~50% of the products manufactured at the Broomfield plant, as these products were no longer competitive in saturated markets. The products are predominantly oral solid generics within cardiology, CNS, endocrinology, respiratory and pain. In 1H17 Sandoz reported pricing headwind of 8% across its global generics portfolio. The reasons given by NVS for the closure suggest pricing pressure on generic manufacturers has continued into 3Q17. This could also be a headwind.”

For now, though Chen sees promise and a great deal of potential value waiting to be “unlocked” in the drug maker’s shares, he is not confident enough yet to recommend Teva shares.

Wall Street tends to agree with Chen playing it safe on this biotech stock, as TipRanks analytics exhibit TEVA as a Hold. Based on 18 analysts polled by TipRanks in the last 3 months, 2 rate a Buy on Teva stock, 13 maintain a Hold, while 3 are bearish on the stock. The 12-month average price target stands at $20.88, marking a nearly 41% upside from where the stock is currently trading.TEVA analyst ratings chart